The new rule means that gender confirmation surgery, which can be prohibitively expensive for many transgender people, must be covered for patients for whom it is medically necessary.

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New York's financial regulators advised health insurers statewide on Thursday that they must cover treatment for transgender patients deemed to be medically necessary.

The Department of Financial Services said commercial insurers may not deny needed treatment, which can include hormone treatment and reassignment surgery, for gender dysphoria — when someone's gender at birth is contrary to his or her identity.

The guidance sends the message that discrimination against transgender people won't be tolerated, department Superintendent Ben Lawsky said.

According to the department, the current edition of the American Psychiatric Association Diagnostic and Statistical Manual of Mental Disorders classifies gender dysphoria as a mental disorder, which therefore should be covered.

While insurers retain the right to review coverage claims as they do with any others to evaluate the medical necessity, New York regulators said consumers have the same appeal rights provided under state law.

"An issuer of a policy that includes coverage for mental health conditions may not exclude coverage for the diagnosis and treatment of gender dysphoria," wrote Lisette Johnson, chief of the department's Health Bureau.

The Transgender Legal Defense and Education Fund said New York follows eight other states and the District of Columbia to do this. The others are California, Colorado, Connecticut, Illinois, Massachusetts, Oregon, Vermont and Washington. In May, the federal government ended a Medicare exclusion of coverage for services related to gender transition, the group said.

The fund also called on New York to remove the exclusion its Medicaid program, saying it's not subject to the new guidance. "Transgender Medicaid recipients are some of New York's most vulnerable citizens. They must be able to access medically necessary care," executive director Michael Silverman said.

A spokeswoman for the New York Health Plan Association, Leslie Moran, said some larger plans already provide the coverage for reassignment surgery when it's deemed medically necessary.

There are concerns that now there will be an influx of claims, raising costs next year that weren't considered in the rates regulators approved and are already lower than insurers proposed. Companies also are concerned it will open the door for people seeking other services for mental health reasons, she said.

"We don't expect this to have a material impact on overall premiums," department spokesman Matt Anderson said Thursday.

Empire State Pride Agenda, also calling for the Medicaid revision, said Thursday's guidance won't cost the state or private companies much, citing a report from The Williams Institute on 34 employers who provided it in their benefit plans with very few claims and better employee morale from their commitment to diversity.

"We're thrilled to see New York take this significant step forward in the fight for equal rights for transgender individuals," executive director Nathan Schaefer said. The group hopes the Cuomo administration's signal here will create a climate for New York to finally pass legislation prohibiting discrimination based on gender identity or expression, he said.